[Senate Hearing 107-849]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-849

              THE ANNUAL REPORT OF THE POSTMASTER GENERAL

=======================================================================



                                HEARING

                               before the


INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION


                               __________

                           SEPTEMBER 27, 2002

                               __________

      Printed for the use of the Committee on Governmental Affairs


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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois          SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey     GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia                 THAD COCHRAN, Mississippi
THOMAS R. CARPER, Delaware           ROBERT F. BENNETT, Utah
JEAN CARNAHAN, Missouri              JIM BUNNING, Kentucky
MARK DAYTON, Minnesota               PETER G. FITZGERALD, Illinois
           Joyce A. Rechtschaffen, Staff Director and Counsel
              Richard A. Hertling, Minority Staff Director
                     Darla D. Cassell, Chief Clerk

                                 ------                                

INTERNATIONAL SECURITY, PROLIFERATION AND FEDERAL SERVICES SUBCOMMITTEE

                   DANIEL K. AKAKA, Hawaii, Chairman
CARL LEVIN, Michigan                 THAD COCHRAN, Mississippi
ROBERT G. TORRICELLI, New Jersey     TED STEVENS, Alaska
MAX CLELAND, Georgia                 SUSAN M. COLLINS, Maine
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
JEAN CARNAHAN, Missouri              ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota               PETER G. FITZGERALD, Illinois
                Nanci E. Langley, Deputy Staff Director
                Dennis M. Ward, Minority Staff Director
           Ann C. Fisher, Minority Professional Staff Member
                    Amanda L. Linaburg, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Akaka................................................     1
    Senator Collins..............................................     2
    Senator Cochran..............................................     6
    Senator Carper...............................................    10

                                WITNESS
                       Friday, September 27, 2002

Hon. John E. Potter, Postmaster General, United States Postal 
  Service:
    Testimony....................................................     3
    Prepared statement...........................................    31

                                Appendix

Karla W. Corcoran, Inspector General, United States Postal 
  Service, prepared statement....................................    36

Questions for the Record submitted to Postmaster General Potter 
  from:
    Chairman Akaka...............................................    55
    Senator Cochran..............................................    63
    Senator Levin................................................    71
    Senator Carper...............................................    72
    Senator Collins..............................................    77
    Senator Torricelli...........................................    81
    Senator Thompson.............................................    83
    Senator Hagel................................................    87

Questions for the Record submitted to Karla W. Corcoran, 
  Inspector General, United States Postal Service from:
    Senator Stevens..............................................    88


 
              THE ANNUAL REPORT OF THE POSTMASTER GENERAL

                              ----------                              


                       FRIDAY, SEPTEMBER 27, 2002

                                     U.S. Senate,  
 Subcommittee on International Security,     Proliferation 
                                    and Federal Services,  
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:05 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Daniel K. 
Akaka, Chairman of the Subcommittee, presiding.
    Present: Senators Akaka, Carper, Cochran, and Collins.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Good morning. This hearing will please come 
to order.
    Postmaster General Potter, it is a distinct pleasure to 
welcome you back to the Subcommittee today. It is hard to 
believe that it has been only one year since your first 
appearance before Congress. You and the employees of the United 
States Postal Service have gone through more than one could 
ever imagine.
    On September 11, 2001, the postal employees pulled together 
to deliver the mail to most parts of the country. Americans 
were comforted by the sight of postal workers that day and in 
the weeks to come. Unfortunately, the events of September were 
followed by the horrible anthrax attacks that felled two postal 
employees. It was a chilling reminder that ordinary people, 
just doing their jobs, could fall victim to terrorism. And 
later last year, when pipe bombs were found in the Midwest, 
postal employees showed their dedication and loyalty again as 
they continued to process and deliver the mail. General Potter, 
you and your employees deserve the Nation's gratitude.
    General Potter. Thank you.
    Senator Akaka. I also wish to commend you for embracing 
this Subcommittee's request for a comprehensive report on the 
future of the Postal Service. The Transformation Plan you 
presented our Subcommittee last May was a well conceived 
document. I appreciate the extent to which the plan addressed 
many of the fundamental issues associated with the management 
and operations of the Postal Service.
    At our May hearing I expressed concern that the plan failed 
to lay out a detailed deficit reduction plan. I am pleased that 
we have this opportunity to continue this dialogue. I am 
hopeful that we can talk about time frames, how proposed cost-
cutting goals will provide adequate funds for capital needs, 
and how the Postal Service will deal with long-term liabilities 
associated with pension plans and post-retirement health 
benefits while ensuring the retirement security of its 
employees.
    I was heartened by your announcement earlier this month 
that the Postal Service expects to begin the new Fiscal Year 
with a positive financial outlook of a $600 million profit. 
Despite a net loss for this Fiscal Year, such good news 
indicates that the cost-cutting initiatives you have instituted 
will help to sustain a strong and vibrant Postal Service.
    The financial problems facing the Postal Service remain a 
serious threat. However, I believe you are making progress and 
I am confident that those of us who care about the future of 
the Service will work toward the common goal of its survival.
    I strongly support using existing flexibilities, whether 
they be for the Postal Service or Civil Service. So it was good 
news that the Service is seeking pricing flexibility on two 
fronts. One is a discount for small periodicals and the other 
is a negotiated service agreement for major financial 
institutions.
    There have been other issues under discussion that affect 
the Postal Service. I know you were hopeful that the House 
postal reform legislation would have gone further and I 
understand that my colleague from Delaware plans to introduce 
similar legislation in the Senate next year. The White House is 
considering the creation of a Presidential Postal Commission 
which would be similar to legislation introduced by the Senator 
from Maine.
    Again I welcome the Postmaster General to the Subcommittee 
and now I yield time to my colleague, Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you very much, Mr. Chairman. Thank 
you.
    I want to welcome the Postmaster General this morning, 
also. I had the pleasure recently of speaking before the 
National Association of Rural Letter Carriers at their annual 
convention, which was held in Portland, Maine this past summer. 
As I was preparing my remarks to speak to the letter carriers I 
was struck by the thought that it used to be that postal 
employees' greatest problem was biting dogs. Now it is the 
threat of anthrax in letters and pipe bombs for rural letter 
carriers. So I want to second the comments made by the Chairman 
as he saluted the courageous work of our letter carriers in the 
wake of September 11.
    I look forward to hearing the Postmaster General's report 
this morning on the status of the Postal Service. Along with 
many of my colleagues, I have become increasingly concerned 
about the many challenges facing the Postal Service, which has 
lost substantial sums of money during the past couple of years. 
The financial crisis facing the Postal Service affects its 
employees and its customers and raises concerns about whether 
it can continue to meet its vital mission of providing 
universal service to every corner of our country, from Hawaii 
to Northern Maine. That is a challenge that the Postal Service, 
in my judgment, must continue to meet.
    There is little dispute that the structure that we now have 
for the Postal Service is in need of reform. The question is: 
What is the best way to accomplish the goal of ensuring that 
the Postal Service remains vital into this century? Legislative 
reform efforts have been met with stalemate in the past few 
years. For that reason, I have proposed legislation that would 
create a presidentially appointed commission composed of 11 
members appointed by the President. The commission's charter of 
study would be very broad, extending to every relevant area. 
After a year from its first meeting the commission would issue 
a report on its findings and recommendations for postal reform. 
I believe that an outside look by an independent commission 
would be valuable to the Postal Service as it continues to 
implement its Transformation Plan and also to Members of 
Congress as we seek to write a postal reform bill.
    I would note that the last time there was a major postal 
reorganization in 1970 it was also based on the work of a 
commission. While I cannot guarantee that we would have the 
same kinds of result, I believe that there is considerable 
evidence that without an independent commission it will be very 
difficult to get the reforms that are needed to preserve the 
Postal Service as a strong and vital entity into this century.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much for your statement, 
Senator Collins.
    I now would like to hear from the Postmaster General. You 
may proceed.

TESTIMONY OF HON. JOHN E. POTTER,\1\ POSTMASTER GENERAL, UNITED 
                     STATES POSTAL SERVICE

    General Potter. Good morning, Mr. Chairman. Good morning, 
Senator Collins.
---------------------------------------------------------------------------
    \1\ The prepared statement of General Potter appears in the 
Appendix on page 31.
---------------------------------------------------------------------------
    I appreciate this opportunity to meet with you today to 
report on the progress of the United States Postal Service 
during the past year. That progress is a reflection of the 
outstanding efforts of Postal Service employees throughout the 
country and the entire mailing industry. The mailing industry 
is a $900 billion part of the national economy that has 
increasingly become an integrated, interdependent national 
network that employs 9 million men and women. This year, 
working with the Postal Rate Commission and our customers, we 
brought about an unprecedented negotiated rate settlement. We 
thank the PRC and our customers for their support.
    My thanks to this Subcommittee for its commitment to the 
Postal Service and the people it serves. Your assistance over 
the last year has contributed to a level of success that, in 
the first months of the Fiscal Year 2002, did not seem 
possible.
    It was a year marked by challenges and measured by 
innovation. Throughout the horror of September 11 and the 
bioterrorism attacks, postal employees helped keep this Nation 
connected as never before. We focused on new ways to move the 
mail and control costs.
    Six months ago when we released our Transformation Plan I 
made two pledges. First, I said we would continue our strong 
focus on improving service performance and holding the line on 
costs.
    Second, I promised we would do our part to make the 
Transformation Plan a reality by beginning to make the changes 
that are possible now under the current legislation. In 
essence, our management team committed to managing the business 
like never before.
    Today I want to give you a progress report on those 
commitments. First, I am pleased to report that we have pulled 
$2.9 billion out of our bottom line this Fiscal Year by 
eliminating unnecessary and redundant programs; by taking 
advantage of our buying power to make smarter, more efficient 
purchases; and by reducing career employees through attrition 
by more than 23,000. Our total complement today is similar to 
what it was in 1995, and since 1995 we have grown by 21 billion 
pieces of mail and added some 12 million new deliveries. In the 
past year our operating group destroyed the myth that they 
could not react quickly and decisively in periods of declining 
mail volume to increase productivity and improve service.
    Despite the loss of some 6 billion pieces of mail from the 
previous year, employees and managers rose to the challenge and 
delivered a positive total factor productivity as well as a 1.9 
percent increase in labor productivity. From a Service 
performance standpoint, last fall's attacks on America required 
major realignments in our transportation system, including 
better use of our transportation partnership with FedEx and 
major adjustments to our national processing networks.
    By the recently ended fourth quarter we reached record 
levels of performance for overnight, 2-day, and 3-day First-
Class Mail, as well as Priority Mail. Express Mail scores are 
the highest they have been in 4 years.
    I want to assure you that the Transformation Plan is not 
the plan du jour. As long as I am Postmaster General we will 
use the plan to advance universal mail service and America's 
mail. We have set transformational targets for ourselves and we 
are well on our way to achieving them.
    For example, last week, as the Chairman mentioned, we filed 
with the Postal Rate Commission (PRC) a negotiated service 
agreement with our largest end user of First-Class Mail to 
incent them to grow their business and ours. This week we filed 
another proposal with the Postal Rate Commission that would 
offer small circulation periodicals a way of achieving work-
sharing discounts so common with larger, mass circulation 
periodical mailers.
    Earlier this year we worked hard with the House on a 
bipartisan reform bill. Although it did not move from the House 
Committee, we are pleased that more and more lawmakers in the 
House and the Senate are showing interest in the future of the 
Postal Service. Our on-going discussions with Congress and with 
the administration make us hopeful for the future.
    Looking ahead, there are many things we can and will do in 
2003. We are focused on four objectives. First, we will 
continue our commitment to improve service performance. As part 
of that commitment we will continue to focus on making 
improvements to reduce the risks our systems face against 
another bioterrorism attack.
    Second, I am committed to continue exploring with the 
Postal Rate Commission alternatives to the rate-making process 
within the current legislation. Those alternatives include 
additional negotiated service agreements and phased rates.
    Third, we will use our transformation strategy to grow our 
business by enhancing existing products and services and 
expanding access and convenience.
    Finally, we will continue to manage our finances and reduce 
costs. Fiscal Year 2003 will be the second in our 5-year 
transformation commitment to take $5 billion out of our bottom 
line.
    Last year this Subcommittee raised concerns about postal 
debt and asked us to put together a plan for debt reduction. We 
responded to your concerns and focused on our finances. We went 
into Fiscal Year 2002 projecting a $1.35 billion negative net 
income. We soon faced other challenges--a declining economy, 
September 11, and the anthrax attacks. As a result, we renewed 
our emphasis on managing our finances. For instance, we took 
dramatic steps to reduce expenditures. We imposed a freeze on 
facility construction. For the first time in postal history, we 
were able to reduce current year expenses below expenses of the 
previous year.
    Much of the credit for these savings goes to our employees, 
who have gone that extra mile. Their efforts enabled the Postal 
Service to reduce our projected negative net income to 
significantly less than $1 billion. We will have the final 
numbers later on this year. This also means that we will be in 
a position to reduce our debt at least $200 million this year. 
The significance of this number is that last September we were 
projecting an increase in our debt of $1.6 billion. This $1.8 
billion turnaround is dramatic and is a credit to all our 
employees and the mailing industry, who helped make it happen.
    Our aggressive implementation of the Transformation Plan 
has positioned us to achieve a positive net income in the 
coming Fiscal Year 2003. This positive net income also means 
that by the end of Fiscal Year 2003 we will be able to further 
reduce our debt by almost a billion dollars. These projections 
reinforce the pledge that I made 6 months ago that there will 
be no general rate increase until well into calendar year 2004.
    Keeping our rates affordable and improving service are at 
the heart of the Transformation Plan. The need to execute the 
entire Transformation Plan remains as critical today as it was 
12 months ago when we faced dire circumstances.
    As our Transformation Plan states, legislative changes are 
essential to the long-term health of the Postal Service. I look 
forward to working with you to bring about the legislative 
changes needed to assure affordable, universal mail service for 
future generations.
    Before I close, it is imperative that I ask your assistance 
in another key area. As outlined in our Emergency Preparedness 
Plan, the Postal Service will continue to focus on reducing 
risk from any future bioterrorist attack. The President and 
Congress came to our aid earlier this year by approving the 
emergency supplemental appropriation of $762 million for 
equipment to help reduce the risk from biohazardous material. 
We are grateful for this help. To that end, we are considering 
the purchase of biodetection and filtration equipment for use 
at our automated processing centers.
    To facilitate the procurement of this equipment, we support 
and urge your support of Senator John Warner's amendment to 
H.R. 5005, the Homeland Security bill. This amendment would 
include the Postal Service among those agencies, such as the 
Department of Health and Human Services and the Department of 
Transportation, that are engaged in procuring the means to 
reduce biohazardous risks. We believe this is the right thing 
to do.
    In closing, let me thank you for your support and for 
helping us stay the course during this last year. And I look 
forward to our continuing work in the future years. Thank you 
very much, Mr. Chairman.
    Senator Akaka. Thank you very much for your report and your 
statement. I would like to ask my friend and colleague Senator 
Cochran for any statement he may have.

              OPENING STATEMENT OF SENATOR COCHRAN

    Senator Cochran. Thank you, Mr. Chairman.
    Welcome, General, to this annual review of the Postal 
Service operations. I am very pleased to observe that your 
financial situation is better than had been expected. The 
deficit is lower than had been expected. I commend you for that 
and during the question-and-answer period we will talk about 
some of the things that you have done to help make that happen 
and what other steps could be taken to improve the financial 
condition of the Postal Service.
    I noticed in today's paper, for example, a report on the 
Brentwood facility and a public meeting that was held about 
making that facility safe or possibly reopening it at some time 
in the future. It would be good to hear about your plans in 
that connection. We do want to be sure that the Postal Service 
provides safe mail and mail handling, not only for customers 
but for workers, as well, and we know that you have been 
challenged very seriously on this subject and in this area by 
the anthrax situation.
    We hope that you will continue to keep a look out for ways 
to improve the efficiency of the Service and fulfill the 
mandate under the law, which is to provide universal service at 
affordable rates. We appreciate very much your hard work in the 
job you have, a tough job. Thank you.
    Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much, Senator Cochran.
    Mr. Potter, we have questions and I will limit myself to 6 
minutes so that we can move with questions.
    Mr. Potter, at our May hearing we discussed the Service's 
Transformation Plan. One cost-saving measure is the redesign of 
the Postal Logistics Network. You said this would require 
reducing the number of processing centers and altering 
transportation routes for greater efficiency.
    What is the status of your plans for redesigning the Postal 
Network and what facilities have been or will be closed in the 
near future? And how are you working with communities on these 
consolidations and closings? And how are you involving postal 
employees in these efforts?
    General Potter. The Postal Service has built and is 
finalizing a network integration model. Last year at this time 
we did not anticipate the major loss of mail, so we are in the 
process of reviewing some initial plans, but we have this 
model; it is under development. That model will be used to 
determine how we can most effectively adjust our network. That 
is the network of facilities, as well as the transportation 
network that connects those facilities.
    This past year we have taken a very hard look at our 
network. We have primarily focused on annexes of our major 
plants and we have shut down some annexes in our plant network. 
We intend, once we have the network integration model analysis 
complete, to share that with our customers, with the 
communities involved, and our employees, but at the current 
time that modeling has not been finalized.
    Senator Akaka. The Board of Governors last month announced 
their support of the creation of a presidential commission to 
review the Postal Service. What are your views on a postal 
commission and continued efforts to enact postal reform 
legislation?
    General Potter. Personally I believe that there is a need 
for change, as I said earlier, and whatever vehicle gets us 
there is the vehicle that I am going to jump on and support. 
Certainly a commission, a properly formed commission with a 
proper agenda, can elevate the debate to the level that I 
believe it needs to be, and that is at the public policy level.
    As we look forward and all postal administrations worldwide 
look forward, there is the obvious threat of hard copy mail, 
moving to the Internet and moving to an electronic format. We 
have to recognize this is a very real reality, and we have to 
begin to formulate public policy around what to do in the event 
that it happens.
    In addition, the Internet and other things are helping to 
enhance our ability to bring services to customers. So access 
to the post office used to mean that you had to go to a post 
office. Today you can go to a bank and ATMs will dispense 
stamps. Grocery stores dispense stamps. We have others who do 
that and you can buy postage over the Internet.
    So we have to look at the future needs of the American 
public and determine how best they will access postal services. 
Today you can buy stamps by mail. We believe that there is 
going to be a need to balance the future public policy from a 
standpoint of how do people access our services and what will 
the demand for those services be? And we need to craft and 
paint a picture of what a future Postal Service will be like so 
that I, the rest of the managers in the Postal Service, and 
future postmaster generals can manage toward that goal.
    Senator Akaka. The Postal Service has just announced that 
it expects to realize a profit in the next Fiscal Year. I know 
you hope to use these extra funds to pay down some of the 
Service's debt to the Treasury. It appears that the projected 
profit is based on increasing mail volume. When you testified 
at our May hearing you were very pessimistic about relying on 
increasing mail volume to generate revenue. Have your views on 
this issue changed?
    General Potter. Well, we are projecting for the upcoming 
year that there will be a slight growth in volume. The main 
reason that we are able to say we will be in a position to pay 
down debt is because of the tremendous cost-cutting that has 
occurred within the Postal Service, and again I have to credit 
all of our employees. Our productivity is up. We are expecting 
our productivity to stay up.
    Despite the fact that I just said we are going to have some 
growth next year, we will still be below our Fiscal Year 2000 
levels, so we are going to grow from a depressed base. We lost 
some 6 billion pieces of mail last year. We are going to grow 
from that lower figure, but we are not going to get back to 
where we were in the coming year.
    It is a combination of improvement over a depressed base 
and the fact that we are being very frugal and being very cost-
conscious. The combination of the two will enable us to have a 
positive net income, and currently we think it will be almost a 
billion dollars that we will be able to pay toward our debt 
next year.
    Senator Akaka. Thank you very much. My time is up, so I now 
ask for questions from our Ranking Member, Senator Cochran.
    Senator Cochran. Mr. Chairman, I notice one of the first 
questions you asked was about postal reform and whether or not 
a major initiative for a commission would be in order and since 
that is Senator Collins's bill, I think I will defer to her for 
any questions about that--she was here before I was, anyway--to 
go ahead and ask questions that she might have.
    Senator Akaka. Senator Collins.
    Senator Collins. Thank you very much and I thank my 
colleague from Mississippi for his usual graciousness.
    Postmaster General Potter, I want to follow up on the issue 
of the commission, though perhaps I do so with some trepidation 
because your initial response to the Chairman may be as good as 
I am going to get on this.
    Given the failure of postal reform legislation during the 
past few years, even this past year where there was so much 
discussion in the House committee and a lot of input and yet 
still the bill did not even make it out to the House floor, do 
you not think that a commission would be helpful as far as 
taking an independent look at the Postal Service and assisting 
you, as well as Congress, in coming up with some 
recommendations for us to consider, for you to consider, that 
might help us implement postal reform?
    General Potter. I do think an independent look at the 
Postal Service would be helpful, as I said earlier. I believe 
that there are some major public policy issues that have to be 
addressed.
    On the other side of the equation though, I do not want to 
give the impression that should there be an effort to have some 
legislative changes that could help us in the short run, that I 
would be opposed to them. So the bottom line is I would like to 
see change. I understand the benefits that a commission can 
bring, particularly if it is an independent commission. And if 
they step back and look at the big picture and the role that 
the Postal Service has in terms of serving America and the 
public policy issues that would naturally come up around 
universal service, as an example, I do think a commission could 
be helpful.
    Senator Collins. Thank you. Recently I met with a group of 
more than 20 businesses in Maine that ranged from printers to 
small catalogue companies to L.L. Bean, all of whom rely 
heavily on the Postal Service and all of whom expressed great 
concern to me about having more stability and predictability in 
postal rates. One of the catalogue companies, for example, told 
me that the cost to mail his catalogues now greatly exceeds the 
cost of the paper on which the catalogues are printed. Another 
told me that the recent rate increase had created great 
problems for its company because he had already set his prices 
for his products in the catalogue and then there was the 
unexpected rate increase.
    What are your plans for ensuring more predictability and 
more stability when rate increases are necessary? What a lot of 
these businesses told me is they understand there are going to 
be rate increases but it is when they are unexpected, more 
frequent, or higher than they can plan for that they really 
create tremendous strains for their businesses and for the 
employees for which they are providing good jobs.
    General Potter. Well, let me address the stability part of 
the question first. I believe that obviously it is a matter of 
implementing the Transformation Plan. We have set some very 
aggressive targets for ourselves in terms of productivity, in 
terms of cost containment, and we have to stay the course. If 
our costs remain relatively stable, then prices will be lower 
and predictable, so that is the first step in the process.
    Second, I have said and repeatedly have said that I would 
like to have a discussion with customers about phased rates. It 
is a concept that is used in other countries. Some customers 
have come to me and told me that when they deal with Canada 
Post, for example, that they know what their rate increases are 
going to be 2 years out. When you look at our competitors, they 
raise their rates on an annual basis.
    We have a system, again a legislated system, that has the 
Postal Service raising rates every 2 to 3 years and in the 
process, what happens from an operational standpoint is that we 
have a peak in volume just before our rate is increased. That 
is because our rates are affordable. Once the rates are 
increased, elasticity kicks in on some of our products, so our 
volumes decline. Therefore, we have a staffing issue on how we 
deal with those peaks and valleys.
    What we would like to do is get to the point, through some 
adjustments in the way we are currently changing rates, where 
we can offer and project rates, and we call it phased rates, 
annualized rate increases. It helps obviously customers; they 
can plan their budgets several years out. And it would help the 
Postal Service in terms of our efficiency. We would not have to 
deal with peaks and valleys in our mail volume.
    We are very eager to do that. We are engaged with customers 
and the Rate Commission to talk through how we could use the 
current process to arrive at that type of situation.
    Just this past week, I had conversations with a number of 
customers about elevating that discussion and seeing what we 
can do in the short run to advance that.
    Senator Collins. I want to turn to one other area. As you 
may well recall, the Postal Service in Maine has had several 
cases in Portland of sexual harassment in the past few years 
and I know this has been of great concern to you, as well. But 
I was disturbed to read in the Inspector General's Report that 
she had initiated an audit of the Postal Service's sexual 
harassment prevention program and encountered, in her words, 
``considerable resistance from management.''
    This is of great concern to me because I know the Postal 
Service had initiated some training programs in Portland, Maine 
that I was putting a great deal of hope in and if the IG is 
finding management resistance to effective implementation of 
the sexual harassment program at the Postal Service, that is 
very disturbing.
    I would like you to respond to those criticism and tell me 
what the Postal Service is doing to ensure that the very 
unfortunate and unacceptable incidents that we experienced in 
Maine do not occur again.
    General Potter. The Postal Service is very aggressive in 
dealing with sexual harassment, dealing with equal opportunity. 
We do not take those matters lightly. We are very aggressive in 
Maine. There has been a change in management. There have been a 
number of training efforts that have been under way. We are not 
going to accept sexual harassment anywhere in the country.
    There can be differences of opinion between the Postal 
Service and others who review our work in terms of how we might 
implement something. I am focused on getting the job done and 
making sure that nobody is a victim of harassment and, if they 
are, that they do not have any fear about advising the proper 
authorities that a situation occurs and that action is 
immediately taken.
    Oftentimes we can get into the semantics of how somebody 
might do something, and I would prefer to focus on the action 
of dealing with the matter. I believe that we have responded 
aggressively in Maine, and we are going to respond aggressively 
anywhere in the country where a problem exists.
    Senator Collins. Thank you.
    Thank you, Mr. Chairman, and thank you, Senator Cochran.
    Senator Akaka. Thank you.
    Before I call on Senator Cochran for questions I would like 
to ask the Senator from Delaware for any statement you may 
have.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. I do have a statement. I think what I would 
like to do is ask that it be entered for the record and I just 
look forward to having the opportunity to ask some questions of 
the general. Thank you. It is good to be with all of you.
    [The opening statement of Senator Carper follows:]
                  PREPARED STATEMENT OF SENATOR CARPER
    Thank you, Mr. Chairman, and thank you, General Potter, for taking 
the time to testify before this Subcommittee again on the state of the 
Postal Service.
    As I've mentioned in the past, this has been a rough year for the 
Postal Service and its employees, possibly the roughest ever. In the 
past few weeks, however, we've heard that, despite another year of 
declining mail volume and declining revenue, the Postal Service's 
budget deficit will be significantly smaller than originally projected. 
What everyone feared could be as high as $4 billion a year ago was 
reduced to $1.5 billion, then $1.2 billion. Now, we hear that it could 
even go below $1 billion.
    The Postal Service does not find itself in this position because 
people are giving up on e-mail and electronic bill pay and sending 
their correspondence through the mail again. As we all know, and as I 
think the Postal Service admits itself, consumers' move from mail to 
newer, electronic means of communication is still happening and will 
continue to happen. The Postal Service finds itself with a rapidly 
improving short-term budget outlook because it has engaged in some 
dramatic cost cutting.
    As the Postmaster General pointed out in his testimony, billions of 
dollars were taken out of the system this year. The freeze on new 
facility construction was continued and further automation was 
encouraged. The biggest cuts, however, appear to have come through 
workforce reductions. About 23,000 positions have been eliminated 
through attrition and work hours have been reduced by 77 million 
despite the fact that the Postal Service is delivering to nearly 2 
million more addresses than it was last year. I understand that the 
Postal Service plans to continue these kinds of cuts next year.
    I'm happy to see the Postmaster General making the Postal Service 
more efficient. I think it should be clear to everyone, however, that 
the kind of cost cutting the Postal Service has engaged in this year 
cannot be sustained and will not be what makes the Postal Service a 
fiscally sound entity in the long term.
    As the economy begins to pick up, the Postal Service may very well 
see an increase in volume as the Postmaster General predicts. At the 
same time, however, the number of addresses they are required to 
deliver to will continue to increase. I don't know what effect this 
year's workforce reductions and the continued facilities freeze is 
having on service right now, but if the Postal Service intends to 
continue balancing its budget by cutting employees and avoiding new 
facilities construction, it will probably have some serious 
difficulties meeting its current delivery standards, and even its 
universal service mandate.
    The Postmaster General is probably doing all he can right now to 
keep the Postal Service afloat. We need real reform of the way the 
Postal Service does business for him to be able to go any further. 
Whether it comes from Congress or from a Presidential Commission, 
postal reform is still necessary. I think it should, and can, come from 
Congress and I hope this Subcommittee will work with General Potter 
next year on this issue.
    I look forward to hearing from General Potter today and to learning 
from him exactly what kinds of flexibilities he thinks this 
Subcommittee needs to give him and his successors so that the Postal 
Service can get by in the electronic age.

    Senator Akaka. Senator Cochran.
    Senator Cochran. Mr. Chairman, thank you.
    I understand that mail volume has substantially decreased 
this year, as a matter of fact, to a greater extent than we 
have seen since the Great Depression in the 1930's. My question 
is what has this done in terms of revenues and the financial 
condition of the Postal Service? And do you have any 
information about whether we are on the rebound and is volume 
picking up? Is this something that is going to take care of 
itself or do you have to take specific steps to try to turn it 
around?
    General Potter. The Postal Service did lose more volume 
this year than it ever has in its history, including during the 
Great Depression. Volumes dropped some 6 billion pieces of 
mail. In the first quarter of last year they were down some 5.5 
percent. We have seen them gradually come back. In our last 
accounting period, we saw less than a 1 percent drop in volume 
from the previous year.
    What we did throughout was we adjusted the use of our 
resources to match this lower workload. In fact, we went beyond 
that. If we had just matched it, our productivity would be 
flat. Our productivity was up. So we aggressively managed our 
costs.
    What do we have to do? We have to focus on growing the mail 
back. So as much as we focused on costs, moving forward, we 
have to focus on growing volume. That is a matter of working 
with our customers to understand what their needs are, to make 
postal products more effective for them in their business, 
whatever that business happens to be. We are working as hard as 
we can to make that happen.
    And long-term, in terms of people using the mail, we have 
to assure them that we are going to manage our finances such 
that they will not see tremendous increases in price. And that 
is what we have laid out in our Transformation Plan and that is 
what we are doing as we speak.
    Senator Cochran. I notice also you have had a freeze on 
capital spending in effect for the past 2 years. Can you tell 
us what impact this has had on postal operations? Has it had a 
serious effect and maybe been one of the reasons you have lost 
volume?
    General Potter. I do not believe that the capital freeze 
has had any impact on the Postal Service's volume. The volume 
was lost because of the economy, because of September 11, 
because of anthrax attacks and a very weak advertising 
industry. I think we all know that advertising was probably 
more dramatically impacted last year than anybody, and there 
are a lot of reasons why that occurred.
    But as we look forward, we are taking, I believe, the 
necessary steps to manage our costs, to create products and 
services that people will use the Postal Service for.
    I am sure that at the beginning of the Fiscal Year there 
were a lot of concerns about our service levels. And, as I said 
earlier, we have made dramatic improvement. We are now beyond 
where we were a year ago. We are now at all-time highs on 
First-Class Mail, Priority Mail, and our Express Mail scores 
are the best they have been in the last 4 years.
    So we believe we are delivering a quality product. Those 
people who had some concerns about the Postal Service last year 
should try us again. The mail is moving. It is getting home on 
time. And we believe we can effectively serve business and the 
American public.
    Senator Cochran. I think a lot of people do not realize the 
impact that this anthrax business and the screening and special 
precautions that have been implemented, the effect that has had 
on delays. For a while we were waiting months literally for the 
delivery of mail to our offices here in the Senate but I notice 
that has changed substantially in the last month or so.
    Do you foresee a time when we will actually be getting mail 
in the same way we used to without these long delays?
    General Potter. Well, Senator, I would like to point out 
for the people watching out there that we do have a special 
step that we take for the mail that is coming to the Congress 
and other high-threat receivers of mail. So the service that 
you are seeing here in the Congress is not what the rest of 
America is seeing and that is not measured as part of the 
system I just talked about.
    When we first were hit with anthrax, we had to create a 
procedure to irradiate mail for the Senate and the House and 
other government agencies, and initially that took some time. 
Today it is adding about 2 days to 3 days to the process of 
delivering mail to the House. So I would encourage those that 
have mail for the Senate, send it. We do not want you to hold 
that back.
    Senator Cochran. Do not go that far. [Laughter.]
    General Potter. Send plenty of it.
    But back to the issue, we did have procedures. We did have 
some issues that we did have to work around, and it goes beyond 
just irradiating mail. We have two facilities that are still 
closed--the Brentwood facility and the Trenton facility. And 
our people did a phenomenal job in putting together work-
arounds so that we can deliver mail to those communities served 
by the Trenton facility or Belmont facility, as well as the 
facility here in Brentwood. Those people are seeing mail 
delivered in a very timely manner.
    Our employees have had to make sacrifices. We had people 
who worked in those buildings who are now commuting to other 
locations so that they can sort, process, and in some cases we 
had carriers in those buildings, as well, so they could receive 
their mail and bring it out to their customers to be delivered.
    Our employees have risen to the challenge. We are 
delivering mail, as I said, better than we ever have in the 
past, and we are going to continue to do so because we know 
without service, there is no Postal Service.
    Senator Cochran. Right. Thank you. I notice my time has 
expired, Mr. Chairman.
    Senator Akaka. Thank you, Senator Cochran. Senator Carper.
    Senator Carper. Thanks very much for joining us today and 
for your stewardship and for the work that is going on by 
Postal Service employees throughout the country.
    I must say it seems like we were here about a year ago and 
we were talking about a deficit for the current Fiscal Year 
which ends on September 30. I seem to recall that the projected 
deficit was as much as $4 billion. Is that about right?
    General Potter. Yes.
    Senator Carper. And now if I understand these figures 
correctly, we are now looking at a deficit for the Fiscal Year 
that could be as low as $1 billion, maybe even a bit lower?
    General Potter. It is going to be a bit lower, yes.
    Senator Carper. And we are looking at a situation in the 
next Fiscal Year which starts on October 1 where we could see a 
profit of as much as a half billion, $600 million?
    General Potter. Hopefully more than that.
    Senator Carper. I missed your testimony. I have not read 
it; I will read it later, but I understand that a fair amount 
of that is attributable to cost-cutting that is going on and I 
am going to ask you just to take a couple of minutes and share 
with me why you have been able to make such a dramatic 
reduction in this year's deficit and look forward to a profit 
for next year. Just talk to me a little bit about the cost-
cutting that is going on. I understand there are a number of 
positions that have been eliminated but I understand you have 
done that through attrition. If you could just talk to me about 
how that has happened, with a focus on where there has been 
attrition or some other methods used. And maybe if you could 
talk a little bit about how your freeze on capital construction 
has played into your ability to curtail your costs.
    General Potter. Well, not to tell too long a story, we went 
into the year with a deficit plan of $1.35 billion. In 
December, we were looking at revenue decline of $2 to $2.5 
billion. We were looking at costs related to bioterrorism.
    So we embarked on a plan to try and mitigate as best we 
could that projected deficit or deficit that could have gone to 
$4 or $5 billion. And the way we went about that was, first of 
all, trying to match our use of resources, in one case work 
hours, to a lower workload. We had 6 billion pieces less mail, 
so you do not need the same number of employees.
    Senator Carper. Is that an annualized total?
    General Potter. That is an annualized total. You do not 
need the same number of people to work what we had planned to 
be, over 210 billion pieces of mail, as to work 200 billion 
pieces of mail. So we modified our use of work hours based on 
this lower workload that we received.
    In addition to that, we went beyond that, and we actually 
have seen productivity improve. So had we just managed to the 
lower workload, we would have seen a flat productivity, but we 
went beyond that.
    And our plan coming into the year was to reduce some 30 
million work hours and some 10,000 to 12,000 people. All of our 
reductions were a result of attrition. We have not laid off any 
of our craft employees--no carriers, mail handlers, or clerks.
    We also did not limit ourselves in terms of cost-cutting to 
simply work hours. We cut programs, some that were redundant, 
some we sat back and said do we really need this? Can we afford 
to do that this year? We cut back. We looked at a lot of our 
contracts, supplier contracts, and sought ways to reduce our 
costs.
    So we eliminated some redundant transportation. We had 
lower workload. We could tighten up our transportation.
    We sought help from our customers. Now keep in mind part of 
our result is the fact that our customers agreed to an 
unprecedented rate settlement. That rate settlement allowed us 
to raise rates in June versus October. That contributed $1 
billion to this turn-around.
    Senator Carper. Over 4 months?
    General Potter. Over 4 months.
    Senator Carper. So that would be $3 billion on an annual 
basis?
    General Potter. It is more like $5 billion. It is the lower 
part of our volume period. It is about a fiscal quarter, and it 
is our low volume period.
    So they stepped up to help us with $1 billion. Part of our 
projected deficit were costs that we thought we were going to 
incur and did incur as a result of the terrorist attacks. And 
the Congress helped us and appropriated monies for us.
    So when I look at the result, I truly say that it is the 
entire community that came together to deal with this. By the 
way, we started at the top with our cost-cutting. We eliminated 
20 percent of our officers. We eliminated some 800 jobs at 
headquarters. We eliminated 20 percent of our mid-level area 
officers. We eliminated 10 percent of our administrative 
positions throughout the country.
    So this was an all-encompassing effort. Our employees made 
the largest contribution in terms of that improved 
productivity. Our managers cut back programs, tightened up in 
terms of the amount of personnel that they had. Our customers 
came to the table and delivered $1 billion, and the Congress 
stepped in and helped us with $750 million.
    I do not want you to think it was just postal managers. 
Everybody recognized the dire circumstances and stepped in and 
helped us.
    Senator Carper. Talk to us a little bit about the freeze on 
construction costs, which is something that I suspect you can 
do for a while but not forever.
    General Potter. We placed a freeze on construction costs 
other than for emergency purposes. Any time we have a life 
safety issue, we spend money, whether that is a leaking roof or 
if there is an act of God that might damage a building, we go 
out and repair it.
    One of the things that we have learned over the past year 
is that there were ways to more effectively utilize space in 
post offices. In terms of our future plans, we are balancing 
the ability to tighten up space, as well as growth in 
communities. We recognize that we are going to have to spend, 
and our plan for next year is to spend some monies, a limited 
amount of monies, in those high-growth areas where there is 
need for new construction of postal facilities. We are looking 
at facilities, some construction of postal facilities where 
there is a return to the bottom line.
    Senator Carper. Mr. Chairman, my time has expired. If we 
have a second round of questions for the Postmaster General, I 
would love to ask some more. Thank you.
    Senator Akaka. Thank you very much.
    Postmaster General, the lack of financial accountability in 
business has received national attention, especially since the 
Enron scandal occurred. Congress responded quickly and passed a 
bill focused on financial accountability.
    Given that the Postal Service is essentially a $70 billion 
business, I have two questions. First, do you believe the 
manner in which the Board of Governors operates should be 
changed? And second, do you believe the Postal Inspector 
General should be a presidentially appointed and Senate-
confirmed position to ensure independence from the postal 
management?
    General Potter. First regarding the Board of Governors, I 
believe that the structure of the Board of Governors is one 
that works. They are an independent body. They are 
presidentially appointed. They are very distinguished men and 
women from around America. So I think that the process works. 
They have an outside, independent auditor, and they assure the 
fiscal responsibility of the Postal Service.
    In fact, recently they had an outside consultant come in to 
look at their practices, particularly when it comes to their 
audit and finance committee. What they found was that their 
practices are among the best in the Nation. So I believe that 
the body as structured is effectively what other boards 
throughout the country would do, whether it is a private 
concern or a Federal concern.
    Regarding the inspector general, I would leave comment to 
the Board of Governors, who select the inspector general. Right 
now they are responsible for the selection of the inspector 
general. She reports to them, and I would prefer that they 
comment on that matter.
    Senator Akaka. Thank you. The Office of Inspector General 
and the Defense Contracting and Auditing Agency reviews have 
identified millions of dollars in potential savings in their 
audits. What have you done to ensure that these identified cost 
savings are realized? Does the Inspector General participate in 
the settlement negotiations?
    General Potter. We have created in the last year an office 
within our Finance group to work as a liaison between the 
Postal Service and the Office of the Inspector General to 
ensure that all findings and all opportunities that are 
identified by the inspector general are implemented. We are 
grateful to the inspectors general when they come up with 
findings of fraud and other things that will help the bottom 
line of the Postal Service. We have put in tracking systems to 
make sure that happens.
    Senator Akaka. The Postal Service and the Postal Rate 
Commission hosted two rate summit meetings over the summer. As 
you noted in your testimony, the Service filed a rate case with 
the PRC for a negotiated service agreement with Capital One. 
The Board of Governors also approved the filing of the second 
case involving magazine publishers.
    Can you explain what benefits the Postal Service will 
receive from these rate initiatives and what other initiatives 
are you planning?
    General Potter. First let me thank the Chairman of the 
Postal Rate Commission, George Omas, for all of his help this 
past year. The rate settlement was unprecedented, and we are 
working to build a stronger and better relationship between the 
Postal Service, the Postal Rate Commission and our customers.
    The negotiated service agreement for Capital One is 
designed to incent them to keep mailing First-Class Mail. They 
have solicitations that they send out to customers to try and 
get them to use their credit card, and one of the things that 
they did last year was use First-Class Mail to send out a 
portion of those solicitations. We would like them to stay in 
First-Class Mail.
    So that is strictly designed to increase the amount of 
First-Class Mail that we receive. The contribution of First-
Class letters to the bottom line versus their alternative, 
which is Standard A letters or bulk business mail, is much 
greater with First-Class Mail, so we would like them to stay in 
the First-Class Mail for their solicitations. The NSA is 
designed to do that.
    When it comes to the periodicals, many periodical mailers 
talk about the difference in price between a very large mailer 
and a smaller mailer. The reason that it is a lower price for 
the big mailer is because they are able to prepare mail so that 
it moves through our system rather rapidly. In fact, it 
bypasses a number of handlings in the system.
    What we have designed with the proposal to the Rate 
Commission is to enable multiple smaller mailers to combine 
their mailing such that they can bypass steps in our system and 
therefore lower their costs and in the process, lower the price 
that we have to charge.
    We are working with other mailers and other entities to 
determine whether or not there are other opportunities like I 
just described. Our goal is where there is a mutual benefit, 
meaning there is a benefit to the Postal Service and to the 
mailer, to either incent growth and/or to change a process so 
that it is more economical for the handling of mail. We would 
like to engage in that process.
    We are looking forward to other negotiated service 
agreements. I can tell you there are a lot of mailers out there 
who are very enthusiastic about it. I can tell you from the 
Postal Service's standpoint we are also enthusiastic about 
moving down that path.
    Senator Akaka. Thank you very much. Senator Cochran.
    Senator Cochran. Mr. Chairman, thank you.
    I understand, General, that the Postal Service is studying 
whether to close or consolidate some postal facilities. What is 
under consideration and how do you think this may affect the 
Service's future capital investment needs?
    General Potter. Today we are considering the consolidation 
of our mail processing centers. We have almost 300 centers 
around the country. We have seen a change in the mix of mail 
and by that I mean where mailers used to bring in mail locally 
for mail to be sent throughout the country, we have seen that a 
lot of them are bypassing the originating facility and bringing 
it to destination. The workload in some of those receiving 
facilities has gone down.
    We have seen a lot of business communities move to 
electronic messaging, electronic payment, so we have seen a 
decline in volumes in certain facilities around the country.
    At the same time that we have seen declines in pockets 
around the country and change in mailing behavior, we have also 
improved the efficiency of those operations by introducing 
automated equipment. And the combination of all three things 
has created a situation where we have some underutilized 
buildings and where there are efficiencies to be gained by 
consolidating operations.
    As I said earlier, no final decision has been made on 
network consolidations. We are currently modeling the 
alternatives that are available to us. We are trying to factor 
in not only the current volumes that we have, any changes in 
mail mix that might be planned by our customers, as well as 
growth that we might anticipate in different areas around the 
country.
    Senator Cochran. To what extent will you involve local 
communities in these plans or the announcements of plans and 
how to deal with that in terms of local interests?
    General Potter. Well, part of our consolidation plan 
includes a thorough analysis of service to make sure that there 
is no diminution of service to customers involved. It addresses 
where mail might be deposited to assure that customers do not 
have to move mail any further than necessary, so they can 
deposit mail and they can do it conveniently.
    We do involve customers in that process to tell them how 
things are being changed. We also involve customers because if 
we eliminate a node on a network, we must tell them where to 
deposit mail.
    As far as the American public is concerned, it is 
transparent. The post offices that they buy stamps in, the 
letter carrier that comes to their door, they are unaffected by 
the changes that happen within the network. In terms of the 
general public, they do not see a change and our goal and our 
commitment when we make those changes is to maintain the level 
of service that we provide.
    Senator Cochran. What will happen to the employees that 
work in these facilities?
    General Potter. There will be no lay-offs. In some cases we 
will be able to make these changes primarily through attrition. 
We might be able to downsize without having to affect the 
location of where someone works. Worst case scenario, we might 
have to excess employees out of that facility and move them to 
neighboring facilities where there is work.
    There is a process within our contract, our labor 
agreement, on how we deal with a situation where we find 
ourselves with excess employees, and that is the term that is 
used in the contract.
    Senator Cochran. Some have expressed concerns about the 
Postal Service awarding large sole source contracts, such as 
contracts with Goodyear and FedEx. Is the Service increasing 
its reliance on sole source contracting? Is this having an 
adverse effect on open competition? And is consideration being 
given to expanding contracts to include not only air 
transportation but possibly ground transportation?
    General Potter. Like any other business in America, we are 
looking to take advantage of our buying power, and one of the 
ways is to consolidate multiple contracts so that we can get 
the best price that we can from our suppliers.
    Sole source is not the sole mechanism to do that. We 
compete those contracts with one or two exceptions. Those major 
contracts are competed. The best price is sought out, and that 
is what has enabled us to make a big contribution to the 
financial results that you see in the past year.
    Senator Cochran. One of the initiatives included in the 
Transformation Plan is a private employee-owned company to 
investigate equal employment opportunity complaints. Can you 
give us an update on the status of this initiative? And does 
this have the potential for approaches in other areas?
    General Potter. We are considering entering into 
negotiations with a company to determine the feasibility of 
moving to an ESOP, where our employees work for a private 
company to investigate EEO matters. We believe it is prudent to 
have an independent group investigating EEO complaints and we 
are looking at that as an alternative down the road for other 
areas, but we do not have any definitive plans. Certainly, it 
is an option that we look at when we consider future costs of 
anything that we do.
    Senator Cochran. Thank you, Mr. Chairman.
    Senator Akaka. Thank you very much, Senator Cochran. The 
senator from Delaware, Senator Carper.
    Senator Carper. Thank you, Mr. Chairman.
    When my time expired, General Potter, I was asking about 
what you have done in order to hold down your costs on the 
capital construction side. You have not curtailed dramatically 
your investment on the capital side where productivity is 
enhanced. Is that a fair statement?
    General Potter. That is very fair. We continue to spend 
approximately $1 billion a year to invest in equipment or other 
product-enhancing investment opportunities. We are very 
concerned about the future of the Postal Service, and we want 
to make sure that we do not make any short-term decisions that 
would affect our future ability to have affordable prices or to 
provide a high level of service. So we have continued to invest 
in those projects that give us return.
    Senator Carper. Give us just a couple of examples of the 
kinds of investments that you have made in the last year to 
enhance productivity and maybe some examples of what you would 
like to turn to next.
    General Potter. Well, probably the best example of a 
machine that has enhanced our productivity is the automated 
flat-sorting machines that we have.
    Senator Carper. Automated flat-sorting?
    General Potter. Automated flat-sorting machines. We have 
the ability today, similar to letters, where we feed mail 
through a machine that automatically feeds the mail. It reads 
the address using optical character-reading technology. Where 
it cannot read an address, it sends that address to a keying 
station, and there are some 30 around the country, where people 
key the flat mail, so that we can properly sort the mail. We 
have some 530 machines that we have deployed over the last 
several years, and they have made a dramatic difference not 
only in our costs of handling flats but a dramatic difference 
in terms of our ability to provide a high level of service for 
flats.
    Senator Carper. When you talk about flats, what all does 
that include? Does it include catalogues, stuff like that? 
Magazines?
    General Potter. A flat is anything that is greater than a 
letter. It is a magazine. It is a catalogue. It is a large 
manilla envelope. Basically if it is beyond 6\1/2\ inches high 
and up to 10 inches wide, it is a flat.
    Senator Carper. Are there more productivity gains to be 
made in that area with respect to flats?
    General Potter. There are. We are continuing to move more 
mail onto this equipment. We have not exhausted all of our 
opportunities. We are taking mail out of small post offices and 
automating it. We sort the mail down to the carrier route on 
these machines. Initially we focused on the mail that was 
already being sorted in the mail processing plants. So there is 
more opportunity to better utilize that equipment.
    We have just recently signed an agreement for new package 
sorters. The package sorter will do traditional packages of 
mail. It will also do bundles of flat mail and other bundled 
mail so that we can break down palletized bundles of mail.
    In the future we are looking at equipment that perhaps one 
day could marry the letter mailstream, the smaller envelopes 
with the larger envelopes, and put that mail into walk sequence 
for our carriers. That technology is far down the road, but we 
are making investments today in terms of research and 
development to try and develop a prototype that will be 
effective.
    Senator Carper. Good. You spoke earlier of these negotiated 
service agreements and do I understand you have recently 
entered into one with--is it Capital One?
    General Potter. Well, we have agreed to present one to the 
Postal Rate Commission.
    Senator Carper. How does this process work, please? How 
does the process work with respect to a negotiated service 
agreement? You negotiate with in this case the customer and 
then you present it to the Rate Commission?
    General Potter. Yes, we negotiate with customers. Customers 
can bring ideas to us. In this case Capital One brought an idea 
about, and we had discussions with them about how to keep them 
in First-Class Mail and incent them to keep as much of their 
product in the First-Class mail stream as possible.
    We negotiate with them to determine what it would take to 
incent them to do that, and we evaluate whether or not there is 
a return for the Postal Service. Is it worth our while? What 
will it do to other customers? We do not want to enter into an 
agreement with one customer that would disadvantage other 
customers or perhaps cause other customers' rates to go up.
    So we go through a very elaborate process. We have been 
trying to do this now for about 3 years, and we finally think 
we have worked out a formula that works. We put together a case 
with the customer and make a proposal to the Rate Commission, 
and we go through a litigation process literally where others 
have the ability to come in and comment on what is being 
proposed.
    Senator Carper. How does that process now work with the 
Postal Rate Commission? Is there a procedure, expedited 
procedure? Do they take as much time as they want?
    General Potter. Senator, they have up to 10 months to 
render an opinion on the case. They make a recommendation. That 
recommendation goes to the Board of Governors. In their 
recommendation they can modify what we propose and then the 
Board of Governors has a number of alternatives. They can 
implement what the Rate Commission recommends. They can send it 
back. And ultimately it is the Board of Governors who will make 
a decision based on the recommendation of the Rate Commission.
    Senator Carper. Ten months? My first reaction is that 
sounds like a long time.
    General Potter. It is a very long time, and we hope that we 
can expedite this through the process but legally, I believe, 
they have up to 10 months.
    Senator Carper. You say legally. Is that set forth in law? 
Do you understand it is set forth in law?
    General Potter. As I understand it, yes.
    Senator Carper. Several people in the audience are saying 
yes.
    General Potter. We have had numerous instances where we 
will propose something to the Postal Rate Commission and they 
will expedite it. But they are legally not bound to do that. 
Any time we take something to the Rate Commission we both 
mutually try to move whatever the proposal is through as 
quickly as possible. The only legal limitation, though, is a 
10-month limitation.
    Senator Carper. Thanks.
    My time has again expired, Mr. Chairman. Thank you. If we 
have another round I would love to ask a couple more questions.
    Senator Akaka. You certainly may.
    Postmaster General, you answered this question in part in 
your response to Senator Cochran but I would like to ask for 
further clarification because of some disturbing reports that 
we have been hearing. This has to do with the closure of post 
offices.
    First, when will you decide which post offices will be 
closed? And second, when will these closings take place? There 
have been reports that they will happen right after the 
November election. Can you respond to those questions?
    General Potter. Well first of all, if I misspoke, let me 
clarify. It is illegal to close a post office. There is a post 
office closure process that we have embarked on. We do not have 
a master plan to close post offices. So I want to make that 
abundantly clear.
    When I was speaking to Senator Cochran I was referring to 
mail processing plants, plant operations. We have some 300 
around the country. As I described, there is an opportunity to 
consolidate the processing. It might be just that we 
consolidate tours rather than close buildings. In fact, in most 
cases we would probably consolidate tours from two buildings 
into one.
    We will not close or do any consolidations in 2002, 
calendar year 2002. Again we are working with these models. We 
have people who are drafting proposals from around the country. 
We are going to evaluate them at headquarters, and we are going 
to make sure we take the necessary steps to implement them 
properly.
    I do anticipate that there will be some consolidations in 
calendar year 2003.
    Senator Akaka. Thank you for that clarification.
    Your emergency preparedness plan indicates that you will 
need $799 million in Fiscal Year 2003 to pay for expenses 
related to the prevention of future bioterrorist attacks. Does 
your financial plan anticipate these expenses will be paid by 
the Postal Service, by postal customers, or through an 
appropriation request from Congress?
    General Potter. Well, the answer is easy on that one. We 
would prefer an appropriation from Congress.
    Senator Akaka. During this past year Congress appropriated 
$35 million to cover the cost of decontaminating the facilities 
affected by the anthrax attacks. The Postal Service just 
completed its final systems test at Brentwood facility.
    What is the time frame for cleaning up Brentwood and where 
are you on the clean-up at the Trenton mail processing 
facility? Do you know when these facilities will be reopened?
    General Potter. Senator, we are moving as quickly as we can 
to reopen our facilities in Brentwood and up in Trenton. We are 
trying to do it in a very diligent way in the sense that we 
want to take all precautions so that we are not doing anything 
that potentially could harm the communities that surround those 
facilities. We want to make sure that we take care so that the 
facilities are properly cleaned so that you and I could walk 
into those facilities with confidence that they are not a 
threat to our health. If we are unable to do that, our 
employees should not go back into those facilities.
    My understanding is that we are probably going to have 
another test at the Brentwood facility before we move ahead for 
clean-up. Again we are working with other Federal agencies. We 
want to do everything that is necessary to assure the safety of 
those who are going to fumigate those facilities and treat 
those facilities, the surrounding communities, and our 
employees when they go back into those facilities.
    I wish I could give you a time frame. The clock keeps 
moving back but it is moving back for proper reasons. It is 
because we are taking other precautions, and we are making sure 
that it is done right and that we do not have any harm. But our 
goal is to clean Brentwood as quickly as we can. The same team 
that is being used in Washington, DC, will then move to New 
Jersey, and it will conduct a clean-up of the Trenton facility.
    Senator Akaka. The Postal Service emphasizes the need to 
involve the four postal employee unions in initiatives relating 
to the Transformation Plan. Could you please provide us with an 
update on how this is going and give specific examples of the 
progress that has been made?
    General Potter. We have been working very closely with our 
unions and it began last year with anthrax. We have a Mail 
Security Task Force that meets on a regular basis to discuss 
the parts of the Transformation Plan that deal with the 
protection of our employees and the reduction of risk to our 
system from biohazardous threats.
    In addition to that, we meet on a regular basis. I 
personally meet with the heads of the four unions and three 
management associations to discuss where we are going with the 
Transformation Plan. I was very excited that the National 
Association of Letter Carriers has come to an agreement with us 
to work together on the implementation of the Transformation 
Plan. It was announced at their convention last month, and I 
want to thank their president, Vincent Sombrotto, for his 
support. And we are looking forward to working with that union 
and all the unions on the Transformation Plan.
    And it goes beyond just legislative change. Part of that 
agreement with the NALC talks about the flexibility that is 
necessary to meet the needs of the American public moving into 
the future.
    So I am excited by the fact that these conversations even 
take place. Years ago that would not have even been the case. 
But I am also excited that we are seeing progress and we are 
coming to common understanding on a lot of the issues. We will 
not always agree about everything but I do think we have a 
common goal and a common desire for the Postal Service to be 
successful in the future.
    Senator Akaka. Thank you very much. Senator Cochran.
    Senator Cochran. Mr. Chairman, thank you.
    General, in the Postal Service's Transformation Plan it is 
stated that you plan to develop some new products and services. 
Can you tell us what new products and services you are 
considering?
    General Potter. I can give you an example of one that was 
kicked off on September 22 and that is a product called 
Confirm. What Confirm enables a customer to do is to put a 
code--we call it a planet code--put a code on their mail that 
is read by our optical character-readers on bar code sorting 
equipment and other equipment so that they can deposit their 
mail and they can track it through our system.
    Oftentimes in the past people have had to call up 
postmasters to say, ``Did you see my catalogue? Did you see my 
periodical?'' And what we have built is a system that allows 
codes to be read, no labor involved, same optical character-
reading capability, so people will be able to track their mail 
through the system.
    The benefits to the customer are many. We have some 
customers who are using this, insurance companies and others, 
who have bills that are outstanding from customers. Before they 
mail a second piece to say you are in arrears and you failed to 
meet your payment, they can check to see whether or not that 
customer has sent a response.
    And there are other things that make it a better product, 
whatever they use it on, for them. For example, there are 
customers who send out advertisements. They know when the 
advertisement hits a home so that they can set up their 
fulfillment response and better predict what is going to happen 
in terms of their use of resources.
    So that is one example of a product where we have a 
product, you pay a fee, but it enhances one piece of our core 
business, in that case letter mail or flat mail.
    Senator Cochran. Did you realize any net income from any 
new products and services during this current Fiscal Year? If 
so, how much income do you----
    General Potter. No, we did not.
    Senator Cochran. Have you taken any steps to improve the 
financial information relating to costs and revenues associated 
with new products and services, including e-commerce?
    General Potter. Yes, we have raised the bar in terms of our 
financial reporting, and we deal with those products on a 
separate basis. A lot of that financial analysis has led us to 
curtail and eliminate some products, particularly e-commerce 
products, that we had offered.
    So as we introduce new products we put in a very tight 
financial monitoring system and then we evaluate the business 
plans that were developed around those new products. We will be 
able to make evaluations, I think, in a more timely way to 
determine whether or not we continue on with a product or we 
eliminate a product.
    Senator Cochran. Speaking of discontinuing new products or 
services, have you discontinued any new products over the past 
year and how have you reached those decisions as to whether 
something is making money or going to make money or is losing 
money and should be abandoned?
    General Potter. Well, in the past year we have eliminated 
Net Post Certified, Poste CS, a couple of our electronic 
commerce products. We have used the financial data that we have 
to reevaluate the relationship that we have with others on some 
of these products. For example, our eBillPay product, we have 
totally revamped our contract such that today we allow people 
to access that product using our website but our total 
investment is one staffer to manage the system, the process, 
and ensure the integrity of the system. But we literally just 
allow people to use our brand name on that product. We do the 
due diligence to make sure that it is an effective product.
    Now we anticipate that we are going to have net income from 
that, positive net income from that, as a going concern into 
the future as a result of the changes that we made.
    Senator Cochran. Are you satisfied that you are evaluating 
the performance of new products and learning why you are or are 
not making money with some of these new products?
    General Potter. I am satisfied that we have made tremendous 
progress in our analysis. I cannot tell you that I know for 
sure why we make or do not make money. I think a lot of the 
marketplace dictates that. We are a lot smarter than we were a 
year ago. I think we are going to continue to get smarter as we 
move into the future. We are going to make very crisp decisions 
about whether or not a product is effective for us or is not 
effective and we are going to abandon those that simply do not 
help our bottom line.
    Senator Cochran. Are you concerned about questions 
regarding whether the Service should be spending resources to 
provide products and other services that are already provided 
by private sector companies?
    General Potter. I am not concerned because our focus is 
going to be, while I am Postmaster General, products that 
enhance our core products. So we will look at products that 
enhance letter mail, flat mail, and packages. As I just 
described, Confirm is a new product but it is strictly related 
to our core mission of delivering hard copy and delivering 
package services in America. So as we move forward we are going 
to look to make sure that there is a linkage between the two.
    Senator Cochran. Thank you. Senator Carper.
    Senator Carper. Thanks.
    I arrived a few minutes late and I missed your testimony. I 
was in an earlier meeting in my office on Amtrak. Just about 
every Friday, we pull interested parties together and discuss 
the figure of passenger rail service in our country.
    One of Amtrak's significant customers is the Postal 
Service. Would you just take a minute or two and describe the 
nature of that relationship, your satisfaction with that 
relationship, if you see it diminishing, if you see it growing, 
if there is something that Amtrak needs to be doing to be able 
to provide better service or more service to the Postal 
Service?
    General Potter. I am very grateful to Amtrak for the help 
that we received immediately following September 11 because of 
the fact that we were not able to fly mail. That has been a 
relationship that has worked for both of us. We have a lot of 
rail service, particularly on the East Coast and some rail 
service moving out to the Midwest, Chicago.
    We are reevaluating all of our transportation networks as 
part of that network integration model that I discussed and 
what we are finding is that there are some redundant services. 
There is some mail that we are putting on the train where we 
have a truck that is just as effective. There is some mail that 
is on trucks that might be better served on a train, and we are 
looking at the entire network now, not looking at rail 
independent from highway, independent from air.
    So we are in the throes of that analysis and we will see, 
once that is completed, what role Amtrak will play. There have 
been times that we have had concerns about service. We share it 
with Amtrak and we attempt to work through those problems.
    I do have a major concern, though, when it comes to Amtrak 
and that regards the future of Amtrak. I am sure that all users 
of that service who hear the debate that is going on inside the 
Beltway know that there has been a budget request that the 
appropriation has not quite met and that there is a potential 
loss on service. So certainly we have built contingency plans 
to address that situation should it occur.
    Senator Carper. The Senate has actually agreed, in our 
Transportation Appropriations bill as I recall, to fund Amtrak 
at the $1.2 billion request from Amtrak. The House, I think, 
has included in their Transportation Appropriations bill an 
amount about three-quarters of a billion dollars, which is 
higher than the current level of appropriation, although not as 
high as the Senate, and we will simply have to work out our 
differences.
    We have an opportunity in the context of reauthorizing TEA-
21 to determine to what extent this country should be putting 
additional dollars, maybe earmarked sources of funds, into 
capital investment for Amtrak to upgrade track structure in the 
Northeast and to help develop high speed rail corridors in 
other parts of the country.
    I am actually encouraged by a poll that was published, I 
think in the Washington Post this summer, where they questioned 
people around America about their view of the future of 
passenger rail service, whether we need it or not, and I think 
about 70 percent of the people who responded felt that we 
should maintain or increase Federal support for an inter-city 
passenger rail system. And surprisingly, you would think older 
guys like me would be interested in supporting passenger rail, 
maybe people of my parents' generation who rode the trains when 
they were younger. Actually, there is a lot of support from 
young people.
    At first I could not understand that, Mr. Chairman, but I 
think what it is is a lot of our young people have had the 
opportunity to travel abroad and to ride the terrific trains in 
Asia and Japan and in Europe, to see what passenger rail can be 
and to know what the potential could be here.
    As I came in, Mr. Chairman, I heard Senator Collins' 
comments and I think there was some discussion on a commission 
on postal reform. When you and I were in the House of 
Representatives--and I think Senator Cochran was in the 
Senate--one of the first things that was on our plate was a 
report of a blue ribbon commission on Social Security, trying 
to figure out what to do to save Social Security at the time. I 
think Alan Greenspan was on the commission; I think Bob Dole 
was on it and Claude Pepper.
    They gave us pretty good recommendations and we acted on 
them, depoliticized the issue. We acted on them and 20 years 
later Social Security is still alive and kicking. It is not 
perfect but we got through that scrape in pretty good shape.
    The president, our new president, proposed a commission to 
change the way we may invest our monies in Social Security to 
give people some discretion to invest money on their own 
outside of the Social Security Trust Fund.
    The commission, I think, included Daniel Moynihan, former 
Congressman Tim Penny with whom you and I served, Mr. Chairman. 
And they made recommendations but the recommendations have been 
really for naught. There has not been much that has happened as 
a result.
    We have the opportunity here to consider legislation, 
probably not this year but maybe next year, on a postal reform 
commission. I think a postal commission can serve a valuable 
purpose but I would hope that the nature of the commission and 
the membership of the commission is such that they will not go 
into it with a predetermined result and that people of 
different backgrounds, people with different perspectives, will 
work together to give us a good consensus position and not a 
pitch that is already telegraphed.
    Do you have any views on the facility or helpfulness of a 
commission or maybe the nature of its membership?
    By the way, we voted this week on a commission on the heels 
of September 11 proposed by Senators Lieberman and McCain and I 
think that commission would be appointed partly by the House, 
partly by the Senate, and partly by the President.
    Any thoughts you have on the composition of a commission?
    General Potter. I believe that a commission should be 
independent, that given the fact that we are talking about the 
Postal Service, we probably would be best off if we had 
business people who are not that close to the postal community, 
who could take a public policy view of the Postal Service, 
bring business acumen to the table so they can look at 
opportunities that might be there, so that there is no bias in 
terms of what might happen.
    I do believe our employees need to be represented on a 
commission.
    Senator Carper. And how might that be?
    General Potter. Not them personally, but their views need 
to be represented by somebody who is not a member of our unions 
or perhaps a competitor's unions but another group from labor 
that could witness, participate and make contributions to the 
commission.
    I also believe that the mandate and the charter for this 
commission should be broad and that they should be looking at 
it in perspective of, as I just said, public policy, universal 
service in light of the challenges that face the Postal 
Service--competition with the Internet--look to provide 
services perhaps in a different way than they are currently 
done. As I stated earlier, the idea of bringing services to 
people's doors versus having people have to go to a location is 
something that should be part of the mix of what a commission 
would look at. And the Commission should be chartered to 
provide a mechanism to assure universal service to America for 
many years to come.
    Senator Carper. Thank you for those views.
    My time has again expired, Mr. Chairman. Thank you.
    Senator Akaka. Thank you.
    I have another question, Postmaster General. I understand 
that you have been talking with the two organizations that 
represent postmasters regarding a new procedure for 
consultations. What is the status of these discussions and how 
do you see the matter being resolved?
    General Potter. We have been working with the management of 
the postmaster organizations for the past year and 
unfortunately, we did get a little distracted last fall with 
September 11, with anthrax, and they were active participants 
on our Mail Security Task Force.
    Right after that we had a consultation that we just 
completed that determined their compensation package for 2 
years, so our attention was drawn to that. Once that was 
completed, we engaged in discussions about changes to the 
process, the consultation process, that we might embark on in 
future years.
    It is a very interesting dynamic in terms of discussing 
this issue with postmaster organizations because we have two 
organizations who represent the same people but do not always 
think alike; there are a lot of postmasters who belong to both 
organizations. So we are trying to work through the process of 
how we could change the consultation effort and have those two 
organizations participate, given the fact that they may have 
diverging views but they represent the same people. So it is a 
little delicate but we are working through it.
    Senator Akaka. Thank you for your response. Senator 
Cochran.
    Senator Cochran. Mr. Chairman, I have no further questions, 
either. I think General Potter has done an excellent job 
answering our questions and talking about the Postal Service 
challenges and plans for the future.
    Senator Akaka. Thank you very much. Any further statements?
    Senator Carper. I have just a few more questions if I 
could, Mr. Chairman.
    Senator Akaka. All right.
    Senator Carper. A congressman from, I think, New York, 
Congressman McHugh, has been working on reform legislation, 
toiling in the vineyards for a long time, and I give him credit 
for trying to figure out the right thing to do and to do it and 
there is, I think, some likelihood that we will consider in the 
House and maybe in the Senate next year reform legislation. I 
will just give you a couple of examples of things that I hope 
we could address.
    One of those is the issue of retained earnings. Most 
companies who make a profit retain earnings and they use that 
for--in some cases they pay dividends to their shareholders. 
You do not have shareholders but you do have an obligation to 
the Federal Government to repay and I am pleased at the 
prospect of your being able to pay that down. But I would like 
for us to be able to examine whether or not you should be able 
to retain a portion of your earnings from year to year when you 
are in a profitable situation.
    A lot of companies, when they are figuring out how to price 
their product or their service, they adjust their prices to 
what the market will bear. When the demand is strong they may 
move the price up a little bit; when demand is weak, they may 
lower their prices. And we have seen with the auto companies 
the zero percent financing and what that has done in order to 
spur the purchase of cars, trucks and vans in this country over 
the last year.
    Those are just some of the things. I would like for us 
maybe to consider this model of what changes, if any, should be 
made with respect to the Postal Rate Commission, although I am 
encouraged by the kind of relationship that you described 
earlier.
    I am tempted to ask you what you would have us to consider 
as we move toward trying to shape some legislation in the next 
Congress on postal reform. Rather than do that here, though, I 
think what I will do is just say put it on your radar screen as 
something we would like to talk with you about and with maybe 
the Board of Governors and others who represent your employees.
    Who chairs your Board of Governors these days?
    General Potter. The chairman is Robert Rider.
    Senator Carper. That sounds familiar. Where is he from?
    General Potter. Delaware.
    Senator Carper. How is he doing?
    General Potter. He's doing great. He hired me. He is doing 
a great job. [Laughter.]
    Senator Carper. And indirectly, he sort of hired me, too, 
with about 300,000 other people who voted.
    Both the Chairman and Senator Cochran asked a bit about the 
closure of underutilized facilities. When we were in the House, 
Mr. Chairman, I think we had our first round of base closing 
commissions and we will probably see another one of those in a 
year or two. I do not recall ever in the time we debated those 
issues when we were in the House or in the Senate when anyone 
came to the House floor or the Senate floor and said, ``Boy, I 
wish you would close my base. Sure would like to get rid of my 
Air Force base or my naval facility or my Army facility.'' I do 
not remember anybody ever calling for that.
    And by the same token, I do not remember hearing anybody 
who said, ``Please close my post office. We would like to get 
rid of that baby.''
    General Potter. I have not found one yet, either.
    Senator Carper. I have not seen that. But we know that 
there are bases that ought to be closed and some that have and 
there are probably some post offices that ought to be closed, 
as well--maybe not a lot but probably some. And I would just 
say as you go forward and consider that, what I always find is 
helpful if you are going to take away a facility or a service 
that people are used to, replace it with something better. It 
does not have to be the same facility but provide even better 
service so that when people come to me or other members of the 
House and Senate and say, ``God, do not let them close my post 
office,'' it is really helpful if we can say, ``Well, your post 
office, which is losing X dollars per year, the people who use 
that service are going to be provided better service in these 
ways.'' I would ask that you keep that in mind.
    Two more things. One of those is alternative energy. In my 
State we have learned how to take biodiesel fuel, to mix 
soybean oil--we have a lot of soybeans in Delaware. We use the 
oil from the soybeans, we mix it with diesel fuel and now all 
of our DelDOT vehicles are diesel-powered.
    And as we go forward we are grappling with an energy bill 
in our conference between the House and the Senate today and a 
part of that is alternative energy, renewable forms of energy, 
and I do not know to what extent the Postal Service is able to 
use or uses diesel fuel to power your vehicles. I would just 
ask that you keep in mind that there is a great interest here 
in the Senate, not just from Delaware but other places, as 
well, on the use of biofuels to power particularly diesel-
powered vehicles.
    General Potter. We believe that we are a leader when it 
comes to alternate fuels and we are going to continue to do 
that. We are very concerned about the environment and so we are 
a pioneer and we are going to continue to be that way.
    Senator Carper. That is great. In the energy bill that is 
in the conference there are really three roles that the 
government is attempting to play to bring about cleaner energy, 
more efficient energy sources. One of those is R&D investments, 
early R&D investments through the Federal tax dollars.
    The second is to commercialize technologies by using, for 
example, in vehicles on the military side and our civilian 
side, to use our purchasing power to commercialize more energy-
efficient, cleaner burning vehicles, and you have a great 
opportunity at the Postal Service to help commercialize those 
new technologies and we are mindful of that and grateful.
    There is a contraption called a Segway which has been 
developed. I have heard some different uses being proposed for 
it and I do not know if any of those involve the Postal Service 
or not. Do they?
    General Potter. We have tests going on around America. We 
work very closely with Dean Kamen, the founder of Segway and 
the inventor of Segway, and we are testing them on mail routes 
across the country. We even have them in the Bronx. We are 
analyzing the Segway to determine whether or not there are 
benefits, and we believe there are, to the Postal Service in 
terms of first for our employees and wear and tear on their 
legs, as well as the efficiency of delivery of mail. Those 
tests are under way and I think we are in the second phase of 
what is a three-phased program to test, thoroughly test, that 
piece of equipment.
    Senator Carper. Any idea when you will be in a position to 
say this is good, this is something we would like to use or 
expand?
    General Potter. As soon as those tests are complete.
    Senator Carper. Next year?
    General Potter. Probably a year from now. We are excited 
about it. We are making enhancements, and I compliment the 
folks that work on Segway because as we come up with issues, 
they find solutions. So it is a good partnership, and we are 
looking forward to completion of the tests and the analysis of 
data.
    Senator Carper. Mr. Chairman, my time has again expired. 
Let me just say thank you for giving me this much opportunity 
to ask questions. I have had a chance in my first 2 years in 
the Senate to participate in a lot of hearings and this has 
actually been one of the more constructive and encouraging 
hearings and I want to express my thanks to General Potter and 
those with whom he has worked--employees and your customers and 
everyone for the encouraging words.
    There is obviously more to be done and I like to say that 
the road to improvement is always under construction and that 
is probably true in this case, as well.
    The last thing I would mention just in closing is grievance 
procedures--we do not have time to get into it today but I have 
heard in discussing with our own postal employees in Delaware 
how grievance procedures just take forever and I would like to 
have the opportunity maybe to explore how that is changing and 
what you are doing about that. I know it is a concern.
    General Potter. I would really like to talk to you about 
that because we have made a lot of progress in grievance 
procedures. We still have one area that is an area of concern 
and we are working closely with that union and I hope we can 
make a breakthrough this year. So I look forward to a 
conversation on that.
    Senator Carper. Good. Thanks so much. Thank you, Mr. 
Chairman.
    Senator Akaka. Thank you.
    Senator Torricelli has a number of questions for the record 
and I just want to say that the record will remain open for 
Senators to submit additional questions until October 4.
    Postmaster General, I would like to thank you very much for 
your testimony and your responses to our questions today. It is 
clear that the Postal Service is moving forward in its 
transformation. We must never forget how critical the mail 
system is to linking our country together and the economic 
significance of the Nation's $900 billion mailing industry.
    I also would like to thank all of those in the audience who 
are interested in the well-being of the Postal Service and are 
working together to meet the challenges ahead. I want to thank 
the Members of this Subcommittee, too, for their interest in 
this.
    Senator Cochran, would you have any further to add?
    Senator Cochran. I have nothing further, Mr. Chairman, 
thank you.
    Senator Akaka. Again I want to say thank you, Postmaster 
General. This hearing is adjourned.
    [Whereupon, at 11:47 a.m., the Subcommittee was adjourned.]


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